“Europe is America’s indispensable partner,” U.S. Vice President Joseph Biden said on Saturday. “I am a firm believer in transatlantic ties. Europe and America still look to each other. Our collaboration could not be closer,” he added.

Last year, only three allies—the United States, Britain, and Greece—despite the severe economic crisis in the country, spent more than two percent of their budgets on defense.

Even more revealing about the state of the Alliance’s spending is NATO’s Annual Report that was published last week.

Allies had agreed that at least 20 percent of defense expenditure should be devoted to major equipment spending, which Rasmussen said was a crucial indicator for the pace of modernization.

Yet in 2012, only five allies spent more than 20 percent of their defense budgets on major equipment expenditure. Nine spent less than ten percent.

In the short term, this means, first of all, that Europe is relying more than ever on the United States to provide modern military equipment for NATO missions. At the same time, interoperability between European and American forces is becoming increasingly difficult.

Second, there are growing asymmetries in military capability within Europe, too. “This has the potential to undermine Alliance solidarity and puts at risk the ability of the European allies to act without the involvement of the United States,” according to the Annual Report.

And third, further cuts in European equipment procurement will weaken Europe’s defense industry and rob it of its competitiveness in terms of technology and innovation.

In this situation, Rasmussen’s solution is smart defense. He is right to focus on that. The Kosovo war, the NATO mission in Afghanistan, and its intervention in Libya revealed major weaknesses in NATO’s capabilities.

Not only does smart defense—the sharing and pooling of capabilities between allies—offer a chance to offset the cuts in spending. It is also bound to strengthen NATO because member states will need a platform for organizing their cooperation.

"We are discussing the role of NATO after Afghanistan,” Rasmussen told Carnegie Europe in an interview. As an example, he explained that NATO was establishing a “new Alliance hub for intelligence, surveillance, and reconnaissance”.

This would provide political and military decision makers with more accurate and up-to-date information.“The European allies realize that they have to invest in intelligence surveillance, in reconnaissance,” Rasmussen added.

It will not be easy for Rasmussen to achieve these goals. After all, his predecessors also nagged allies to spend more efficiently and share military capabilities, and this was even before the global financial crisis then followed by the euro crisis.

But two things may be in Rasmussen’s favor: the Obama administration’s strategic shift toward Asia and the inability of the EU to develop a Common Security and Defense Policy.

The United States is no longer willing to jump into every military mission and lead it, as we saw in Libya and with the French operation in Mali.

This is not necessarily a bad thing as it could force Europe to choose.

Either it goes down the French path, with France or perhaps Britain creating temporary coalitions of the willing, or it decides to commit itself to an alliance of solidarity, making much better use of scarce resources.

At the same time, NATO can take advantage of the European Union’s inability and lack of interest in developing a Security and Defense Policy.

Europe needs strong security. The EU is not going to provide that, at least not in the near future. As Thomas de Maizière, the German defense minister told the MSC this weekend: “The main political home of Germany is the EU; its security home is NATO.”

This is Rasmussen’s chance to convince allies of the need to spend more wisely and to coordinate expenditure within the framework of NATO. If he fails, the old continent will fade as a military power. And that certainly can’t be in Europe’s interest.

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